India's gold demand cools after festive rush; price fall propels buying elsewhere

Indian dealers were this week quoting a premium of up to $25 per ounce over official domestic prices, inclusive of 6% import and 3% sales levies, unchanged from last week. Reuters

Physical gold demand in India ticked lower this week as buyers held back purchases, anticipating a deeper price correction, while a pullback in rates sparked buying interest in China and Singapore.

Indian dealers were this week quoting a premium of up to $25 per ounce over official domestic prices, inclusive of 6% import and 3% sales levies, unchanged from last week.

Domestic gold prices were trading around Rs 122,700 per 10 grams on Friday after hitting a record high of Rs 132,294 last week. Meanwhile, spot gold prices were on track for their first weekly drop in 10.

"Last week, buyers were snapping up gold at any price available in the market. But this week, the price correction has made them cautious, with some postponing purchases in hopes of a bigger drop," said a Mumbai-based jeweller.

Indians were celebrating the Dhanteras and Diwali festivals in the last few days, occasions when buying gold is considered auspicious and which are among the busiest gold-buying days in the country.

New import orders are now being placed cautiously and for smaller quantities, as the recent price correction is expected to lower the base import price next week, said a Mumbai-based bullion dealer with a private bank.

The base import price of gold, which is used to calculate import duty, is set fortnightly.

In top consumer China, bullion changed hands anywhere between discounts of $20 to a premium of $8 an ounce over the global benchmark spot price.

"Despite gold prices fluctuating sharply between $4,000 and $4,300/oz, there has been little evidence of traders offloading physical holdings," said Bernard Sin, regional director of Greater China at MKS PAMP.

"Sellers remain limited, while investors continue to hold positions amid macroeconomic uncertainty and declining real interest rates."

Gold in Hong Kong was sold at par to a premium of $2.20, while in Singapore, gold traded between at-par prices and a $2.50 premium.

"We continue to see good demand, especially this week when prices came down, we've seen quite a number of clients coming to buy both gold and silver to take this opportunity to enter the market," said Brian Lan, managing director at Singapore-based GoldSilver Central.

In Japan, gold was sold at a $1 premium over spot prices.